How on Earth did we convince ourselves this bunch would be miles better at fixing the budget than the last lot?

We are being softened up for a tough budget in May

Joe Hockey claims his midyear budget update is an honest assessment of the state of fiscal affairs he inherited from Labor. It isn't.

Rather, it is an attempt to lower expectations about the speed and ease with which the Coalition will be able to get the budget back on track.

Advertisement

He won't be able to achieve it for many years - he's not saying when - and not without significant and painful, but as yet unidentified, cuts in government spending. In short, he is unlikely to be able to do it much faster than Labor would have. What's likely to differ is who will bear most pain.

Labor would have erred in the direction of higher taxes, particularly on the better-off. Hockey has ruled out higher taxes and is hinting at cuts in government spending on ''welfare, education and health''.

Contrast this grim slog with all the Coalition said in opposition about the deficit being purely the result of Labor mismanagement.

This time last year Tony Abbott and Hockey were promising to deliver a budget surplus in each year of their first term. By the election campaign the return to surplus had been delayed until the first year after the next election.

Now even that is in doubt.

Hockey claims the midyear review and deficit estimates it contains draw ''a line in the sand''. From now, he says, he will take responsibility for budget estimates.

Although the pre-election budget statement, certified by the most senior econocrats, was specifically instigated by the Howard government to remove all doubt about the true state of the budget at election time, Hockey is claiming to have uncovered a budget black hole.

This financial year's budget deficit is now expected to be $17 billion bigger, while the cumulative deficits for the next four years are expected to be $68 billion bigger. Little of this can be fairly attributed to the previous government. More than 60 per cent of the expected worsening in this year's deficit is attributed to decisions made by the Abbott government, most particularly the capital grant of almost $9 billion to the Reserve Bank.

It represents a piece of creative accounting, loading up the deficit in the year for which Labor can be blamed so as to improve the deficit in the years for which the Coalition will be responsible.

But when you look at the expected deterioration over four years, 80 per cent of it is attributable to the worsening outlook for the economy just since the election.

Hockey is trying to shift the blame for this deterioration onto Labor but, in truth, if it comes to pass it will be caused by factors largely beyond the control of any government.

Hockey is right in his claim that government spending grew a lot faster under Labor than it tried to have us believe. He is right, too, in saying the present prospect of another decade of deficits cannot be accepted.

We are being softened up for a tough budget in May. What remains to be seen, however, is whether Hockey and Abbott have the toughness needed to get the budget back on track and do so without damaging the economy in the short term or sharing the pain unfairly.

438 comments

Absolutely right Ross. Your first sentence says it all....The answer is quite simple....A biased lazy hard core right media claque focused only on the errors of the alp and never gave any scrutiny to he LNP. It didn't take too much analysis to realise the flaws of Abbott and bias to toward the wealthy despite being portrayed as the best friend of the worker.

Commenter

Tadd

Date and time

December 18, 2013, 6:43AM

Ross, there is no question “We are being softened up for a tough budget in May”. That budget has the potential to be a real boneshaker. Australia faces challenging economic times; on that there is broad agreement. It falls to Joe Hockey to negotiate these troubled waters – his hands are on the wheel.Joe, beware the inevitable Siren calls of vested interests – as you guide the good ship Australia to Ithaca. Mate, strap yourself to the mast.Hockey will indeed require the wisdom, grit and cohones of Odysseus to get us through this. It remains to be seen if he is up to it.Along the way, there will be the ‘economic figures’ to give a measure of the economic state of play during the tenure of the Abbott government – but they won’t measure misery, injustice and lost opportunity. This is your responsibility Hockey and don’t squib on it – be mindful of these important parameters. The pain should be shared broadly and fairly, but there are some who can shoulder a greater burden – and they should be expected to do so.

Commenter

Howe Synnott

Location

Sydney

Date and time

December 18, 2013, 7:40AM

Thanks Ross. I knew an even-handed, let's cut to the chase analysis from you would allow those unable to see ' with clarity' what exactly Hockey and Abbott were trying to do.Those of us who don't follow either LNP or ALP (or Greens), can step away and look at things with a little more balance than those who stubbornly remain wedged to one side. This government, like any other, will be called to account for their stupid mistakes (not discounting the last 100+ days). Merry Earwax, Messrs Abbott, Hockey, Pyne, et al.

Commenter

Jump

Date and time

December 18, 2013, 7:51AM

Why not look back and be thankful for the times you had under labour where flippant spending kept you in the way if life you enjoyed and put that up against the horrendous levels of unemployment and free falling standards of living the rest of the established world endures since GFC. What goes up must come down - we just shouldn't have spent as much as we did over the past 4 years.Accountability is important and if rather we made tough decisions now than when it is too late....australia is like a spoiled child and you and Gittins and the rest of this country need to stop throwing your little tantrums and grow up and face facts that politics is not a popularity contest - there is actually the running of the country that needs to be done also!!

Commenter

MA

Date and time

December 18, 2013, 8:04AM

@MA - if the country does 'need to be run' - then you'd better have a quick word in Abbott's ear and ask him to start - he hasn't done anything so far.

Commenter

Jump

Date and time

December 18, 2013, 8:10AM

It's funny how the left are so worried about the debt now the coalition is in power. Not to many laborbots quoting the debt to GDP number now - remember the comparison they used to make to Italy, Spain and Greece. Not anymore!!! Debt is now a bad thing is it?

Commenter

Chameleon

Date and time

December 18, 2013, 8:13AM

MA it is called Keynesian economics. Govts spend in bad times and save in good times. It is what Labor did (and the rest of the world didn't) and look where we are. Number 1. Labor also managed a real reduction in govt spend for the first time ever. Howard never did that despite a booming economy, he simply cut taxes for the rich and that is where our current problem lies

Commenter

Franky

Location

Sydney

Date and time

December 18, 2013, 8:16AM

Abbott is the King of Lies. Except his his are not masterful or intelligent, they are blunt enough to be seen by his loved bogans and his rabid small business, who can see that Abbott is a Man of Big Business.

There is barely a reason to adjust spending - budget would return to surplus in 2017 - but Abbott has worsened the budget, bleating about "the mess". Well, the economy is now Abbott's mess - the electorate have short memories, and the polls show him sinking.

He hopes for a turnaround later ... but what largesse will he deliver to his Bogans, where will his rivers of gold money flow. There are no assets to self, no mining booms, not even a GST to deliver money - just a recession.

If more than half the electorate hates him know, where will he be in 12 months - a beloved messiah of recession?

He has fallen for Gillard's strategy, hook, line and sinker.

Commenter

Axis

Date and time

December 18, 2013, 8:23AM

MAThe only spoiled children are the coalition and their supporters who lied and whinged about everything when in opposition and now they are systematically destroying everything good about this country.Just like spoiled children they are pointing at everyone else and saying 'it was him/her'.Too gutless to even take responsibility for their own actions.

Commenter

Think Big

Location

Sydney

Date and time

December 18, 2013, 8:28AM

If the Coalition massively cut spending then Gittins will have a sook. If they don't then he will accuse them of hypocrisy. Fairfax gave their Labor friends a big tick when they were blowing our billions on pink batts and school hall rorts and junk. Seems a bit churlish to me to be critical of the people we now charge to clean up the mess.

18 Dec
A new set of economic assumptions underpin the latest dire budget statement, adding billions to the deficit and debt forecasts, and prompting accusations from Labor that the figures were being massaged to justify swingeing spending cuts and help the government win re-election.

18 Dec
The Abbott government is in a fiscal straitjacket of its own making and will find it difficult to make the deep savings required to put the budget on track to surplus without breaking election promises, according to a leading fiscal expert.

18 Dec
The national disability insurance scheme may not be rolled out in the same form or follow the timetable laid out by Labor, as the Abbott government searches for savings to counter a bleak budget outlook.